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Global Commodity Technical Analysis Report

Commodities Trading in a Negative Zone this Week, 2 Commodities for Sell – Natural Gas, Platinum

Jun 16, 2021

Global Commodity Market Wrap-Up

The precious metals and commodity prices are have stalled after the long rally  and witnessed range bound movement last week due to growing indications of the lower demand from the biggest industrial metal buyer China and the stock market rally which generally moves inversely to the commodity markets. Meanwhile, the Energy sector is continuing its upward movement due to strong demand and clearly outperformed other commodity segments. Agriculture-sector showed weak sentiments last week with soybean prices down by 4.75% while corn prices witnessed marginal gains.     

Meanwhile, all the major commodities are trading in a weak zone this week except Crude oil. The recent decline in prices seem to be primarily led by China’s recent announcement that The National Food and Strategic Reserves Administration is planning to strategically release the industrial metals like Copper, Zinc and Aluminium from its national reserves. The move just came to safeguard its small businesses which have been impacted largely due to huge upsurge in commodity prices in recent months.

The upcoming macro events that may impact the market sentiments include an update on FOMC Statement, Crude Oil Inventory, Natural Gas Inventory, and Unemployment Claims released weekly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on our technical analysis, noted below are our recommendations with the generic insights, entry price, target prices, and stop-loss for Natural Gas August Futures (NYMEX: NGQ21) and Platinum July Futures NYMEX: PLN1) for the next 1-2 weeks’ duration:

Natural Gas August Futures Contract (NYMEX: NGQ21)

Price Action and Technical Indicator Analysis:

NYMEX Natural Gas August Future prices are hovering in an ascending channel pattern on a daily chart but were not able to sustain above the breakout level. Prices have recently witnessed selling pressure from the higher levels due to the strong resistance of the upper band of the channel. Volumes are showing increasing trend along with recent decrease in prices which might increase selling pressure in the commodity.

Moreover, negative price divergence with RSI (14) can be seen on the daily chart. The momentum oscillator RSI (14-Period) is down from overbought region to ~60.50 level, which supports a bearish stance. Now the next crucial support level appears to be at USD 3.070, and prices may test that level in the coming sessions (1-2 weeks).

US Natural Gas Inventory vs. NYMEX Natural Gas Prices


As per the weekly data released by the US Energy Information Administration on June 10, 2021, working gas in underground storage stands at 2,411 billion cubic feet (Bcf) compared to 2,313 Bcf in the prior week, a rise of 98 Bcf for the week ending May 04, 2021. The storage is down by 10.3 percent on a YTD basis. The above chart represents a comparative analysis of US Natural Gas storage and price action for the past 6 months.

As per the above chart analysis, the working gas in underground storage has been increasing continuously and rise over 382 bcf compared to May 13, 2021 further indication the storage is increasing which might put some pressure on the gas prices.

As per the above-mentioned price action and technical indicators analysis, we can conclude that Natural Gas August Futures (NGQ21) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. Technical summary of our ‘Sell’ recommendation is as follows:

NYMEX Platinum July Futures (NYMEX: PLN1)

Price Action and Technical Indicator Analysis:

NYMEX Platinum Futures' price witnessed a breakout of the symmetrical triangle pattern at USD 1163.20 level (on June 08, 2021) on the daily chart. Prices registered a breakout of the sideways pattern that suggests a change in the trend from sideways to downward. Since the breakout, prices are sustaining below the lower band of the pattern. In addition, prices are facing strong resistance of its falling trend line at USD 1172.30 level on the chart.  Prices are trading below the trend-following indicator 21-period SMA, indicating a bearish trend. The volume shows a sharp upside spikes with decrease in the prices from the last few trading sessions, which indicates more bearishness among the market participants.

Meanwhile, the momentum oscillator RSI (14-Period) is trading at ~40.19 level, which indicates the possibilities of more downside in the commodity prices. Now the next crucial support level appears to be at USD 1082, and prices may test that level in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, we can conclude that Platinum July Futures (PLN1) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The summary of our recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications

Disclaimers 

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact the commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Entry Price: For the recommendation(s), the Entry Price is assumed to be in a range. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

Note: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is June 16, 2021 (Chicago, IL, USA 03:30 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV.

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.